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Sunday, May 3, 2009

Dena Bank:-My bet in the banking sector

Scripscan:Dena Bank
Traded in:Nse-bse

Story:Dena Bank is a mid-sized PSU bank with a strong presence in the western region, especially in Gujarat and Maharashtra.Dena Bank is now laying a greater thrust on revenue generation from core banking operations, especially creation of advances.The bank has so far adopted a conservative approach to business expansion. But due to an improvement in asset quality, it now has headroom to expand its business without raising additional capital.At its current share price of Rs 34, the bank is valued at less than 3 times its fy10 earnings. Thus, there is scope for upside in the next 18 months.My earnings estimates are based on the assumption that the bank will continue its growth momentum,and there will be no significant deterioration in its asset quality. Dena Bank is likely to be the preferred target of acquisition by other major banks, largely on account of the improvement in its financials, asset quality and strong regional presence.Four YEARS ago, Dena Bank was struggling with deteriorating asset quality. It has now cleaned up its balance sheet by writing off bad and doubtful loans. This has led to a steady improvement in the bank''s capital adequacy ratio.It has also put Dena Bank back on the growth track, as demonstrated by its topline and bottomline growth in the past 7-8 quarters. Having consolidated its operations, the management is now focusing on increasing revenue from core banking operations by expanding advances. This makes the stock an attractive value-pick in the mid-sized public sector bank space.Investors can put money in the stock with an 18-24-month horizon.

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